“An electric car in Germany today emits more CO2 than a diesel or a petrol car. That’s the reality, because 50% of electricity is generated with coal”

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The CEO of Repsol, Josu Jon Imáz, took part on June 22 in a debate organised by the newspaper El Correo, and took the opportunity to warn of the hypocrisy, inefficiency and paradoxes of European energy policy.
For example, in Spain it is forbidden – by law – to explore for and produce natural gas “and at the same time we are encouraging companies to bring gas from the United States, because we need it”.

And in the course of his speech he made ten proposals – which we have included here – “to recover an energy policy that seeks sustainability and the reduction of emissions, but which at the same time guarantees the security of supply and the competitiveness of European industry”.

Because “we have forgotten in Europe that energy has to be competitive, affordable, at a price that families can afford, at a price that industries can afford in order to be able to compete in international markets. We have provided ourselves with an expensive energy system in the name of sustainability and we find that we are losing competitiveness and industrial employment because of high energy prices. In many cases it is a false sustainability because that industry that we expel from Europe because of high prices, because European industry cannot compete, goes to China or to third countries where the processes are less efficient, where it emits more CO2 and then we bring all those products back to Europe and we consume them. We consume them here, we increase our CO2 footprint in the world, but we are satisfied because in Europe we reduce emissions. This is an exercise in hypocrisy.

Today, just two sectors, the Chinese steel sector and the Chinese cement sector combined, emit as much CO2 as the whole of Europe. And we in Europe have done this with our policies. We have exported these industries, we have exported these jobs and we have exported CO2 emissions so as not to count them.

And I dare to launch here today a ten-point list of proposals to recover an energy policy that seeks sustainability and the reduction of emissions, but which also guarantees the security of supply and the competitiveness of European industry:

1) First step: Industry and energy policies must once again have their own identity and ambitions in European governments, they must no longer be subordinated to climate policies. De-carbonisation must continue to be part of the ambition, without a doubt, but the balance must be redressed. In this respect, security of supply and price must be guaranteed. Price must become a priority in energy matters and every time an energy policy measure is taken, it must be analysed and it must be stated how much it affects the price for consumers and how much it affects the price of energy in industry.

2) Second reflection: the prohibitionist approach to energy technologies must be stopped, firstly because it is a tremendous arrogance on the part of political decision-makers who should let the technologies compete to see which one wins. And secondly, because the challenge of decarbonisation is sufficiently important that we should not be gambling everything on a single card. We need all the technologies because the challenge is not to eliminate hydrocarbons, well yes, for some the objective is to eliminate hydrocarbons, let’s not fool ourselves, but the challenge must be to reduce CO2 emissions. And I am going to give you examples because I do not like to remain in theory: it is hypocritical, it is uneconomic and it is antisocial that it is forbidden to explore for and produce natural gas in Spain. And it is so by law, a law called the Climate Change Act, which is voted in the Congress of Deputies, and at the same time we are encouraging companies to bring gas from the United States because we need it, that is to say, we emit gas in the United States when this natural gas is produced. We emit all the gas and all the energy to liquefy it, so we all transport it here, we burn it, we emit much more CO2 in the whole process, we give a fantastic competitive advantage to American industry, we create the jobs in the United States, we emit more CO2 and we say we are sustainable. But how can we be so hypocritical? Why are we doing this? It is unreasonable that anyone can defend this and I say it, it is law passed in the Congress of Deputies.

“We cannot send CO2 emissions to other continents to say that we in Europe are sustainable”.

3) Thirdly. The mantra that the economy needs to be electrified must end. It will make sense depending on how, where and when. But two facts: do you know what the biggest CO2 emitter in the world is? Do you know what it is? Electricity generation. Second fact. The coal that is used today to produce electricity in the world, I repeat, the coal that is used today to produce electricity in the world emits more CO2 than all the lorries, all the cars, all the planes and all the ships in the world combined, more, more than all the world’s transport. And we must continue on this path of decarbonisation, but with respect to the other sources, beyond wind and solar that support global demand, wouldn’t it make sense to invest in and produce much more natural gas in the world? I mean, simply if we were able to produce more natural gas and replace that coal that generates electricity in the world with natural gas, we would reduce global emissions by 6 billion tonnes a year. And 6 billion tonnes a year is more than all the cars in the world emit today. Simply replacing coal with natural gas, and we are told we must not produce natural gas, but why are we shooting ourselves in the foot as a society in this way?

4) Fourth reflection. Let us avoid redundancy in infrastructures, infrastructures are expensive, in the end they end up being paid for by industrial competitiveness, they are paid for by companies, they are paid for by citizens’ taxes. We must make the most of the infrastructures that exist. Two examples, firstly, nuclear energy: the plants are built, the plants are working; as long as the Nuclear Safety Council certifies that they are fine, that they can continue to work. What is the point in doing away with them? Who is going to pay this bill? Families and industry. Let us extend the life of nuclear power plants while it is technically possible and let us even try to engage with those future mini-nuclear power plants that are already being technologically developed around the world and which could possibly, at these sites, guarantee de-carbonised backup power for the future. Another ‘prohibitionism’ to avoid. Another example: if hydrogen is going to be part of an energy future, let us try to prioritise costs, let us prioritise the use of hydrogen in an industrial environment, which is where it can be produced and used today with greater competitiveness, let us try to focus it on applications to produce ammonia for fertilisers; if it has to be used for aviation, let us try to convert it into synthetic fuels so that we can continue to use the same planes, the same engines, the same tankage, the same infrastructures… let us do all this before filling Europe with tubes. We may have to do it one day, but let’s look for the most efficient way to be able, with the minimum infrastructures, to make progress in new energies as well.

“Do you know what the biggest CO2 emitter in the world is? Electricity generation”.

5) Fifthly, let us avoid financial speculation on CO2 prices. European industry cannot indefinitely resist 100, 120, 130 euros per tonne, per tonne of CO2 emitted. We are competing with the Turks, the Indians and the Chinese. It is about incentivising the transition, it is not about closing down industries so that they go to Turkey, India and China and we increase CO2 emissions in the world and destroy industrial employment. Moreover, the financial investors, who are very clever, know that the European Commission, because it has a very clear green policy agenda, is going to continue to reduce CO2 emission allowances. So they are investing on the sidelines, they are speculating on CO2 allowances and CO2 allowances continue to rise. Investors and financial speculators are still making money. And industry cannot pay the energy costs and industrial employment ends up suffering. Therefore, as long as there is not an adjusted CO2 price at the border, let’s put more rights on the market to put an end to this abusive cost of CO2.

6) Sixth reflection. Let us avoid mobility for the rich. Today’s mobility and car subsidy systems are a magnificent system for transferring income from the lower and middle classes to the rich in this society. The person who buys a Tesla, who normally does not have many economic problems, will normally receive 12,000-13,000 euros in aid, 6,000-7,000 euros that we pay him, plus the taxes on hydrocarbons that he will not have to pay during the whole life of the vehicle, but the person who drives an old diesel from the Villaverde neighbourhood of Madrid every morning and cannot change the car, we do not give him even one euro.

7) Seventh reflection. The combustion engine is part of the solution. Banning it damages a key sector of our economy, the automotive industry. It harms the most disadvantaged classes, with more difficult access to other forms of motorisation, and increases CO2 emissions. Banning the combustion engine increases CO2 emissions because, what is happening? What is happening is that car manufacturers have long since stopped investing in science and the engine because they have no incentive. If they are telling you that in 2035 the engine will disappear and before the engines used to lower consumption, from 14, from 15 litres per 100 km to 12, to 10, to 9, to 8, to 7… it doesn’t go down any more. There is no incentive to invest in the combustion engine, so in this way we are increasing emissions or not reducing them, when technologically we could do it and we are also hitting the automotive sector.

Fortunately this will not be the case because responsible governments have started to put on the table that renewable fuels and sustainable petrol and diesels are likely to emit less CO2 in their life cycle than some electric cars. Because we must also take into account the mining of metals in China or the high consumption in the manufacture of batteries.

8) Eighth reflection. We need to use the entire value chain of urban waste, agricultural, livestock and forestry products to produce energy. Today we can convert slurry into biogas and hydrogen. Today we can convert pyrolysed plastics into hydrocarbons for our cars. Today we can convert recycled oils or animal fats into diesel or paraffin, and this is not science fiction. Everything I have said is already being done in our plants, including Petronor, and this is already a reality today. This means added agricultural income and also generates industrial employment.

“Financial investors are speculating on CO2 rights and CO2 rights continue to rise. Investors and financial speculators continue to make money. And industry cannot pay the energy costs and industrial employment ends up suffering”.

9) Ninth reflection.Let us learn from others. Humility. The Americans, with the so-called Inflation Reduction Act (IRA), are going to decarbonise with the carrot. In Europe we are decarbonising with the stick. The American incentive versus European reductionism. In the United States, the regulations are predictable, simple, stable, and we know what will happen in 10 years’ time. In Europe, the 20-20-20, the RePower Europe, the Fit for 55, the Green Deal, every year? I’m already lost with the European regulations, I don’t know which way to look at them, and this does not create certainty for investors. They apply the principle of neutrality there.
All technologies are accepted, here the regulator tells us which one is good and which one is not, but it is not telling us which one is good and which one is not, it is telling us that yes, we should produce hydrogen, but for the hydrogen we produce at Petronor to be considered green hydrogen, the electron has to be produced in the 60 minutes prior to which we produce the hydrogen molecule in the industrial plant. If we have not had the profile selection, it is not included in the regulation.

Of course, it has not occurred to them to think that this photovoltaic plant, due to solar conditions, operates at 2,000 hours in the Basque Country, a little less. And yet the industrial plant has to operate for 8,000 hours. So how are we going to make these plants competitive in this context?

So we have to look more to the United States, because we run the risk of the United States winning the battle for decarbonisation. In Europe, let us learn from the Americans, who are capable of combining a competitive industrial fabric with a serious ambition in terms of decarbonisation.

10) And a tenth thought. Despite the difficulties, we are not here to cry. Companies must take risks, we must gamble, and that is what we have to do. And it is not up to Repsol to pontificate on how energy policy should be. What we have to do is have a vision, obviously, and put it on the table because it is very important for industry, for industrial employment and to be able to reduce emissions effectively, without having to send them to other continents to say that we are sustainable.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.